Trump takes the ultimate risk with the global economy

President Trump's "Liberation Day" tariff plan is one of the biggest, most abrupt economic gambles in presidential history.He acted against the advice of most business leaders, many economists and even some Republican officials.Why it matters: The reciprocal tariffs, which go into effect in one week, target vital trading partners with massive levies — the kind that could raise consumer prices, interrupt business activity and upend global trade.The big picture: With a single stroke of his pen, Trump seeks to re-order the global economy in a way that he believes will create a golden age for U.S. industry.A senior White House official called President Trump's announcement of new tariffs yesterday the "most ambitious economic realignment the American people have ever seen." It's hard to disagree.In less than 100 days, Trump has made an historic attempt to choke off the flow of foreign goods — or at least make it much pricier for Americans to consume them.But there's a reason all those people have recommended a more restrained approach. Prices on imported goods are likely to surge, a recession is possible, and far-reaching ripples in international economics and diplomacy are a certainty.Trump, in disregarding those recommendations, touched the hot stove, knowing he risks getting burned. State of play: It's hard to overstate the scale of the change to U.S. trade policy that has occurred in these still-early days of Trump's term — which dwarfs what occurred over the four years of his previous time in the White House.A regime of mostly open markets that was built over eight decades by leaders of both parties has been ripped apart in a relative instant, without so much as a congressional vote. Yesterday's executive action was undertaken using an emergency national security authority.When Trump took office in 2017, the weighted average tariff on goods the U.S. imported was around 1.5%, which he roughly doubled to around 3% by the time he left office in 2021.After the reciprocal tariffs are implemented on April 9, and counting other measures Trump has already announced, that will jump massively. Early estimates include numbers as high as 21% (via Fitch), or 29% (from Evercore ISI). Those are all the highest in more than a century.That would translate into a 2.3 percentage point increase to overall inflation this year, per new estimates from the Yale Budget Lab, or about a $3,800 impact for the average household.Zoom in: The president's 10% global baseline — applying to countries worldwide — is lower than the 20% some in financial markets had anticipated.But make no mistake: This is the maximalist scenario economists had feared, with eye-popping taxes on around 60 nations that Trump sees as the worst offenders.By the numbers: Chinese imports will be subject to 54% tariffs starting next week, a figure that stacks the 34% reciprocal rate with the previous 20% already in effect.Including tariffs imposed during Trump 1.0, the average U.S. tax on Chinese imports will be 76%, according to Chad Bown, a senior trade fellow at PIIE.Any manufacturers who shifted production to Vietnam to avoid China tariffs are out of luck; that country will now face a 46% tariff.Imports from Japan, South Korea and India now face tariffs of upwards of 25%.European imports will face 20% tariffs, while vehicles manufactured there are subject to 25% tariffs as of this morning, under a policy announced last week.Of note: The rates are so high, and the potential damage so great, that some economists don't believe Trump will follow through. The reciprocal tariffs don't take effect until April 9, which leaves "the door open to back-tracking and further delay," Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics, writes."The speed with which tariffs can be removed also bolsters the case for thinking that a slowdown, rather than a recession, lies ahead," Tombs adds.The intrigue: Trump officials see this as the best way to settle scores with global leaders, who they feel have gone to great lengths to shut out U.S. goods. "In many cases, the non-monetary barriers were worse than the monetary ones," Trump said before listing a slew of accusations like currency manipulation and intellectual property theft.What to watch: Trump and senior officials suggested a tough path for countries to escape tariffs."This is not a negotiation," a senior administration official told reporters. "This is a national emergency.""Any country that thinks that they can simply make an announcement promising to lower some tariffs is ignoring the big central problem of their massive non-tariff barriers," the official said.The bottom line: For decades, American consumers have benefited from a constant flow of cheap goods manufactured from around the world. Be ready to find U.S.-made substitutes, or prepare to pay more.

President Trump's "Liberation Day" tariff plan is one of the biggest, most abrupt economic gambles in presidential history.He acted against the advice of most business leaders, many economists and even some Republican officials.Why it matters: The reciprocal tariffs, which go into effect in one week, target vital trading partners with massive levies — the kind that could raise consumer prices, interrupt business activity and upend global trade.

The big picture: With a single stroke of his pen, Trump seeks to re-order the global economy in a way that he believes will create a golden age for U.S. industry.

A senior White House official called President Trump's announcement of new tariffs yesterday the "most ambitious economic realignment the American people have ever seen." It's hard to disagree.In less than 100 days, Trump has made an historic attempt to choke off the flow of foreign goods — or at least make it much pricier for Americans to consume them.

But there's a reason all those people have recommended a more restrained approach. Prices on imported goods are likely to surge, a recession is possible, and far-reaching ripples in international economics and diplomacy are a certainty.Trump, in disregarding those recommendations, touched the hot stove, knowing he risks getting burned.

State of play: It's hard to overstate the scale of the change to U.S. trade policy that has occurred in these still-early days of Trump's term — which dwarfs what occurred over the four years of his previous time in the White House.

A regime of mostly open markets that was built over eight decades by leaders of both parties has been ripped apart in a relative instant, without so much as a congressional vote. Yesterday's executive action was undertaken using an emergency national security authority.When Trump took office in 2017, the weighted average tariff on goods the U.

S. imported was around 1.5%, which he roughly doubled to around 3% by the time he left office in 2021.

After the reciprocal tariffs are implemented on April 9, and counting other measures Trump has already announced, that will jump massively. Early estimates include numbers as high as 21% (via Fitch), or 29% (from Evercore ISI). Those are all the highest in more than a century.

That would translate into a 2.3 percentage point increase to overall inflation this year, per new estimates from the Yale Budget Lab, or about a $3,800 impact for the average household.Zoom in: The president's 10% global baseline — applying to countries worldwide — is lower than the 20% some in financial markets had anticipated.

But make no mistake: This is the maximalist scenario economists had feared, with eye-popping taxes on around 60 nations that Trump sees as the worst offenders.By the numbers: Chinese imports will be subject to 54% tariffs starting next week, a figure that stacks the 34% reciprocal rate with the previous 20% already in effect.Including tariffs imposed during Trump 1.

0, the average U.S. tax on Chinese imports will be 76%, according to Chad Bown, a senior trade fellow at PIIE.

Any manufacturers who shifted production to Vietnam to avoid China tariffs are out of luck; that country will now face a 46% tariff.Imports from Japan, South Korea and India now face tariffs of upwards of 25%.European imports will face 20% tariffs, while vehicles manufactured there are subject to 25% tariffs as of this morning, under a policy announced last week.

Of note: The rates are so high, and the potential damage so great, that some economists don't believe Trump will follow through. The reciprocal tariffs don't take effect until April 9, which leaves "the door open to back-tracking and further delay," Samuel Tombs, chief U.S.

economist at Pantheon Macroeconomics, writes."The speed with which tariffs can be removed also bolsters the case for thinking that a slowdown, rather than a recession, lies ahead," Tombs adds.The intrigue: Trump officials see this as the best way to settle scores with global leaders, who they feel have gone to great lengths to shut out U.

S. goods. "In many cases, the non-monetary barriers were worse than the monetary ones," Trump said before listing a slew of accusations like currency manipulation and intellectual property theft.

What to watch: Trump and senior officials suggested a tough path for countries to escape tariffs."This is not a negotiation," a senior administration official told reporters. "This is a national emergency.

""Any country that thinks that they can simply make an announcement promising to lower some tariffs is ignoring the big central problem of their massive non-tariff barriers," the official said.The bottom line: For decades, American consumers have benefited from a constant flow of cheap goods manufactured from around the world. Be ready to find U.

S.-made substitutes, or prepare to pay more..